I appreciate Charles' comments. It clearly is a "systems thing." One of
the mistakes I believe we make is to view strategy as static instead of
dynamic.
When it comes to differentiation and the transition to low cost or commodity
pricing, product life cycle issues are critical. Intel's processors are
introduced with high differentiation positioning, but almost immediately
transition to commodity pricing. It's a bit like a ballet with a lot of
things going on...in this case (Intel), their future is intricately tied to
innovation. Note that the average Intel processor has a product life cycle
of 18 months or less. The IPod went through an identical cycle. At
introduction it was a high differentiation product, and as we saw recently
(less than 12 or so months after introduction), they adopted a low
differentiation commodity pricing strategy.
The strategic issue involves a solid understanding of the level of
innovation in the industry/product segment, and then anticipating the rate
of product positioning evolution, and of course, then tying innovation
aggressiveness to that process. It's also important to note that different
industry segments are often operating at different levels competition, and
therefore attempts to standardize rather than contingently customize a
specific industry/product segment strategy will lead to decreased
performance.
Jim Underwood
-----Original Message-----
From: Business Policy and Strategy List [mailto:
BPS-NET@AOMLISTS.PACE.EDU]
On Behalf Of Charles Dewar
Sent: Wednesday, April 12, 2006 11:50 AM
To:
BPS-NET@AOMLISTS.PACE.EDU
Subject: Re: Hybrid Strategies
I thought it was low cost leadership and differentiation. Low cost
leadership would be controlling costs in all activities of the value
chain while differentiation is utilizing innovation across the value
chain.
LCL should result in lower prices but doesn't necessarily have to, it
seems to me. It would result in greater margins and when subjected to
competition, would allow lower prices. But if competition is not
forcing lower prices, the firm wih greater margin would be more able
to survive and adapt to a changing industry or general environment.
Differentiation, of course, also provides a competitive advantage.
Porter found that companies that excel in both perform better than
ones that excel in just one? "Stuck in the middle" companies that
achieve neither are the worst performers...
Then you have to factor in industry life cycle, the congruence of
organizational structure, processes and culture to strategy,
stakeholder balance, developing intellectual capital, cultural
comparative advantages, and so many other factors in order to be
effective. For research, it is always an "all else being equal" that
seems to be necessary to small conclusions. For a business, they must
skillfully consider all the real interactions. One aspect alone
Disclaimer: These views are probably skewed by own perceptions and
possible misinterpretations.
Charles
On 4/12/06, Peter Murmann <
rdstep@ship.edu> wrote:
> My colleague Steve Frenkel asked me a question that I could not answer
> satisfactorily and so I am passing it on the BPS community.
> Can anyone help?
> Peter
>
> Hi Peter: here is my query for the listserv:
>
> Is there any theory or evidence in support of the argument that a firm
> pursuing a strategy that combines both low price and quality or low price
> and innovation is likely to perform better than one that pursues these as
> alternative options? It would seem that in today's hyper-competitive
> markets firms need to be 'ands' rather than 'either' 'ors'. A case
example
> might be South West Airlines - low price AND quality relationships.
>
> I look forward to seeing the responses.
>
> By the way, this question arises from some work I'm doing on Korean
> manufacturing firms. It remains something of a mystery how some of them
> have been so successful in international markets. Or maybe there is a
> simple answer?
>
> Cheers, Steve
> ************************************************************************
> Johann Peter Murmann
> Associate Professor of Strategic Management
> Australian Graduate School of Management
> Sydney NSW 2052
> Australia
>
> Phone: +61 (0)2 9931 9258 Fax: +61 (0)2 9313 7279
> Web:
http://professor-murmann.net
>
> Working Papers:
http://ssrn.com/author=375099
>
> My New Book:
http://knowledge-and-competitive-advantage.info/
> ************************************************************************
>